It was a rather lethargic session yesterday, resulting from the lack of economic or earnings news. Tech and biotech were outperformers, with the former down less than the overall market and the latter advancing. To reiterate what I have been advocating, these are the sectors that will lead us higher and are attracting investor attention. There was hardly any commentary on Apple (AAPL) iWatch orders other than a few passive comments estimating orders in the range of 1 to 1.25 million units. My good friend and colleague Cody Willard had some interesting thoughts on Scutify yesterday comparing iWatch orders to the debut of the iPhone and iPad.
Big Deals Are Coming
What is beginning to heat up are mergers and acquisitions, and not the garden variety type. We are seeing some huge deals taking place. Whether it’s Mylan (MYL) buying Perrigo (PRGO) for nearly $29 billion, or General Electric’s (GE) sale of its financing unit for $27 billion, deals are getting bigger than ever.
Helping to fuel these deals are cheap financing rates and the insatiable appetite for US Dollar denominated debt securities from buyers of all sorts, domestically and internationally. Interestingly, what fueled the 1980s M&A boom was the junk (high yield) bond market controlled by Drexel Burnham Lambert and its senior executive, Michael Milken. Now low interest rate debt availability will achieve the same ends.
One fair bit of advice; trying to guess what stock is going to get taken over is pretty much a fool’s game. The reason is that if you are wrong, you could be stuck with stock that goes nowhere. You are best off buying cheap stocks with growth potential and eventually they will be recognized by a potential buyer. On average, I have at least one stock taken over a year. Think of it as having a potential lottery ticket in any stock that you own.
Earnings Get Interesting Today
Earning season starts to get interesting today. Intel (INTC), JP Morgan Chase (JPM), Wells Fargo (WFM), Johnson & Johnson (JNJ) and CSX (CSX) all report results. Retail sales for March will also be released before the market opens. Recall my themes for 1q15 earnings season. Nap time is over for the markets as prime time is about to begin.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long GE and MYL — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website.
LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is also a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
– You can email Scott at email@example.com
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